Bill Morris: Q & A re Austin Area Building Permits

Q & A re Austin Area Building Permits

A couple of days ago I received some questions on one of my blogsites about my Austin Market Dashboard.  It strikes me that others may have the same questions, so I am pleased to post the following:

I am a financial analyst for a ... company considering entering the Austin market. I have been conducting my own research on the state of housing and non-residential markets in Austin. I came across your article through a google search and I am fascinated by the thought put into the dashboard statistics. Thanks for sharing your research. I am puzzled by the fact that although the general macro trends for Austin (population and employment) are robust the ytd building permits are down 19% (units) compared to last year. The rest of the nation is on a upward trajectory as far as permits are concerned. It appears to me there is a lag with the Austin market in terms of permit recovery. Is this purely due to the fact that Austin had excess capacity and slowly the balance between supply and demand is being met? I would love to hear your thoughts.

Thank you for your note.  I have found my market dashboard to be a valuable tool in discussing market dynamics with clients and prospects.
As you noted, underlying economic strength in the Austin/Central Texas area is encouraging.  Nonetheless, we have felt the effects of the recession and housing downturn, and distortions created by the last two homebuyer tax incentives.  Through November, 2011 unit sales were down 5.5% year to date compared to 2010:
Month Units Sold YTD Units
Month Units Sold YTD Units
2009-Jan 914 914
2010-Jan 1,008 1,008
Feb 1,196 2,110
Feb 1,276 2,284
Mar 1,511 3,621
Mar 1,999 4,283
Apr 1,728 5,349
Apr 2,256 6,539
May 1,875 7,224
May 2,300 8,839
Jun 2,313 9,537
Jun 2,216 11,055
Jul 2,288 11,825
Jul 1,659 12,714
Aug 1,996 13,821
Aug 1,649 14,363
Sep 1,974 15,795
Sep 1,393 15,756
Oct 1,993 17,788
Oct 1,331 17,087
Nov 1,713 19,501
Nov 1,345 18,432
Dec 1,524 21,025
Note that 2011 YTD sales were ahead of 2010 through the first three quarters of the year.
Likewise, residential building permits are down this year:
Month Permits YTD

Month Permits YTD
2009 - Jan 488 488
2010 - Jan 419 419
Feb 456 944
Feb 568 987
Mar 490 1,434
Mar 773 1,760
Apr 705 2,139
Apr 653 2,413
May 511 2,650
May 540 2,953
Jun 736 3,386
Jun 559 3,512
Jul 860 4,246
Jul 534 4,046
Aug 570 4,816
Aug 481 4,527
Sep 541 5,357
Sep 455 4,982
Oct 468 5,825
Oct 363 5,345
Nov 378 6,203
Nov 346 5,691
Dec 479 6,682
In this case, the YTD total fell behind last year in July, upon the expiration of the 2010 tax credit program, and by the end of November it was 8.2% below 2010.  This does not reflect market weakness or builders' lack of confidence.  Instead, it is simply a prudent adjustment of supply to match expected demand as closely as possible.  While new residential construction came to a virtual standstill in the hardest hit U.S. market areas in 2008 and 2009, builders have continued to invest in the Austin area.  Any growth in Las Vegas or Phoenix from close to zero is a large percentage increase, whereas an 8% decline in Austin building permits looks out of step.  (All sales and permit data from the Real Estate Center at Texas A&M University.)
There is one point relating to Austin's new construction capacity that does hold permitting back somewhat:  a shortage of platted lots and subdivisions in outlying areas.  This doesn't account for much of the 2011 decline, but in the coming twelve to eighteen months I expect that we will see some impact. 
By the way, builders limiting their supply is obviously a source of strength for resale property values, and we have enjoyed relative price stability compared to the cities and states that have suffered the most during the downturn.  To the extent that a lot shortage continues to hold construction down we should continue to see resale price strength for the same reason.
Thank you again for your comments and questions.  I hope this is helpful.

Bill F. Morris, ABR, CRS, CDPE, e-PRO, MBA
RE/MAX Capital City
Call or Text:       512-785-3345
Toll-Free:           1-800-692-8784, x 162

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Comment balloon 2 commentsBill Morris • January 19 2011 04:19PM


I am fascinated by these market reports that professionals share here.  I like your set up very much.  I think reading these gives me a much better idea about what is going on in the country than the media does.  Thank you.

Posted by Larry Lawfer, "I listen for a living." It's all about you. (YourStories Realty Group powered by Castles UnlimitedĀ®) over 9 years ago

Larry, thank you for your comment.  I agree, learning what working real estate professionals think is almost always more useful than the national news.  Real estate remains a very local business and reports about the "national market" can't possibly say anything really meaningful about what buyers and sellers should consider in their neighborhoods.

Posted by Bill Morris, ABR, CRS, CDPE, ePRO, MBA (RE/MAX Capital City) over 9 years ago